We examine risk taking when the bank's preferences exhibit smooth ambiguity aversion. Ambiguity is modeled by a second-order probability distribution that captures the bank's uncertainty about which of the subjective beliefs govern the financial asset return risk. Ambiguity preferences are...

In this companion paper to Broll and Mukherjee (2017), we empirically analyse how exchange rate volatilities affect firms optimal production and exporting decisions. The firms elasticity of risk aversion determines the direction of the impact of exchange rate risk on exports. Based on a flexible...